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ROULEUR ISSUE 19.2 - NOW AVAILABLE

  • Brexit, trade tariffs and what your next bike might be

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    In his column for Rouleur 18.7, Matt Seaton wonders what leaving the customs union might do for your aspirations of a custom build

    My first racing bike was steel and handmade. There was no other kind. Bike makers hadn’t yet figured out how to manufacture at scale the complicated inert gas welding that titanium demands.

     

    This was still a couple of years before Cannondale’s experimental outsize aluminium tubing. And carbon fibre had yet to get beyond pro-team prototypes. So steel it was.

     

    That first frame was made by Chas Roberts, a renowned South London frame-builder not five miles from where I lived. London’s outer ’burbs were then scattered with bespoke frame-makers, generally working in Reynolds tubing, 653 or 753 for racing; 531 for general use. Those artisan craftsmen’s names, legends once, are largely gone and forgotten—ironic since “artisanal” is now such a thing.

     

    When I came back to racing in my late thirties, I realised I needed to upgrade, and went continental. In the mid-1990s, Colnago had discovered the spare capacity of the aerospace industry in the former USSR to manufacture titanium frames. So, I picked up a CT1 with Colnago’s signature carbon wishbone rear stays. It’s still a decent ride, twenty years on.

     

    A fine vintage: Colnagos of the past

     

    Since then, I’ve had the succession everyone has nowadays of aluminium or carbon, switching every couple of years, surfing the trends of technological innovation. We’ve all benefited from the upward spiral of a globalised market’s ability to deliver a better product at a better price. It’s not that artisanal frame-building has disappeared, but it has become a discretionary purchase, made for “charisma” and “character” divorced from performance criteria.

     

    But what globalisation giveth, trade war taketh away. This whole world of affordable excellence to which we have become accustomed is not our birthright, nor even a given; it can all go away. What then?

    Trade is complicated, and the effects of tariffs are hard to predict. Donald Trump has imposed a 10 per cent tax on goods imported to the US from China, including bikes—and that’s at least 95 per cent of bikes currently sold in the US.

     

    That cost is likely to be passed on to consumers—which is a hike, certainly, but not enough to make most American bike-buyers order a custom steel frame for $3,000-4,000. So Trump’s trade war with China will cost American consumers, but will not revive domestic bicycle manufacturing.

     

    Read: N+1 – new bikes from Cervélo, Cannondale, LOOK and Litespeed

     

    Europe, on the other hand, knows how to do tariffs. For decades, the EU has successfully defended bike manufacturing on the Continent with “anti-dumping” tariffs of nearly 50 per cent that stopped China flooding the market with cheap product. Portugal, Germany, and Italy all retain significant market share of European bikes sales; Britain supplies just 1 per cent.

     

    Mimicking the US, the UK traditionally had a low-tariff, free-trade policy that hastened the demise of its domestic manufacturing industry—Raleigh, like Schwinn in the US, was basically a goner before British harmonisation with EU policy could stop the damage.

     

    And Britain also mimicked the US in defending its currency. For the US, an obsession with “the strong dollar”—preserving its primacy as the world’s reserve currency, but also making government debt easy to finance because foreign investors always wanted US Treasury bonds, and keeping interest rates and inflation low—had devastating repercussions elsewhere in the economy.

    alchemy bicyclesThe strong dollar meant that whatever benefit American manufacturers might have gained from trade deals like NAFTA [the North American Free Trade Agreement] were eliminated because the almighty dollar made their exports prohibitively expensive. While Schwinn workers lost their jobs because the bikes cost too much, consumers were happy because their Taiwanese-made bikes seemed absurdly cheap.

     

    The Trump tariffs will hurt consumers a bit, but won’t help manufacturers anything like enough. And with the strong dollar policy still in place, that overrules almost all tariff effects of this magnitude.

     

    Regime change: why repressive dictatorships make rear derailleurs

     

    What about the UK? After Brexit [if it happens], the UK will be outside the EU customs union, so unless Theresa May erects her own anti-dumping measures against the likes of China, Vietnam and Taiwan—which seems unlikely since the UK government will be seeking low-tariff trade deals with any partner it can find—the UK’s bike industry will be more vulnerable to cheap imports than ever.

     

    That could be good for consumers, at least those who still have jobs and a disposable income. But the pound is already sliding, and a post-Brexit UK may simply lack the clout to support its currency.

     

    A weak pound would actually be good for a British bike export industry. If one still existed. Instead, a soft pound will make imports of high-quality manufactured goods—like carbon bikes—much more expensive for consumers. So the bike rider in Brexit Britain could be in the worst of all possible worlds.

     

    It could be time to think about that custom-made steel bike you’ve always promised yourself, after all.